UPDATE: Goldman Sachs Downgrades Houlihan Lokey (HLI) to Neutral
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Goldman Sachs analyst Richard Ramsden downgraded Houlihan Lokey (NYSE: HLI) from Buy to Neutral with a price target of $73.00 (from $82.00).
THe analyst comments "We believe that near term valuation on HLI appears less attractive than certain peers, in light of the company’s exposure to restructuring, and could result in its 3x P/E premium versus peers narrowing. In periods when restructuring slows, which we expect to occur in the near term, HLI has seen slower revenue growth to peers and it has traded up to a 4x P/E discount to peers. Our new NTM P/E multiple reflects most of their 3x P/E premium closing, in light of 2% NTM revenue growth vs. 5% for peers. That being said, we continue to see a strong longer term growth trajectory for the company, driven by further market share gains in its core US mid cap M&A business, as well as growth internationally (which has nearly tripled in size since 2015). We expect both of these to be bolstered by further bolt-on purchases, of which HLI has done 16 over the past 10 years. Moreover, we expect HLI’s best-in-class sponsors business and their growing HL Finance business to drive strong, synergistic longer term growth, as they help companies source financing from a growing number of non-bank lenders."
Shares of Houlihan Lokey closed at $68.08 yesterday.
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